Coinjar founder tips 'stablecoin' as the next big thing in cryptocurrency

Although the idea of a stablecoin has been around for a while, Tan says it's only lately that money and expertise has started to gravitate towards it. He reckons some of the big-name venture capitalists are coming in, and that geeks are seduced by it.

The attraction for starter-uppers is the potential complexity. Some stablecoin creators have taken the simple approach of storing the equivalent amount of dollars and offering a tokenised version of that amount (the "custody model" or "collateralised approach" favoured by, say, Japanese banks). But others are trying to engineer sophisticated, decentralised, algorithmic ways of maintaining the peg.

"How do you keep a peg? These are things that usually only a central bank would have thought about five years ago, and now you've got tech start-ups looking at economics, and how can you peg a currency to a token. It's fascinating," says Tan.

"In London I see a lot of finance people getting into it. People with 10, 20 years of forex experience are trying their hand at it. It's drawing a lot of people from traditional financial circles, just because it's interesting, it's intriguing, there's a lot of upside to it."

The gyrating price of bitcoin and its rivals has meant that to some extent they've become an object of speculation and a store of value, like gold. One attraction of stablecoin might be to return cryptocurrency to a medium of exchange, something you actually use in a transaction.

Tan only half-buys this idea. "I think bitcoin went from 'hey let's muck around with this' to 'hey this is valuable', and that changed perceptions. The industry has reacted in several ways. There's a store-of-value camp, there's a medium-of-exchange camp – but these are all metaphors of how we use something now. It's all unfolding very quickly, and if you use a metaphor from the current day to describe something in the future, it's not always going to work."

Tan is considering the potential uses of stablecoins in CoinJar's business. "We're looking at it, I think all exchanges are looking to digitise dollars at some point," he says.

"There are a few Australian stablecoins already – I think there are three or four out there. I think many of them would be happy for us to utilise them. The question is, how do we try to leverage some of these things to provide a better user experience for our users?"

The lure of Europe

Although London is an acknowledged hub for tech start-ups these days, particularly fintech, it still seems surprising to see Tan pick Europe as a target for expansion rather than booming Asia or the silicon-friendly US. The reason, it turns out, is as much to do with regulation and culture as with commerce.

"People say, go to Asia, people there love crypto, the trade is hot there. But there's something about well-regulated markets, the draw of a single-market regime like the euro, which still makes a lot of sense for us, especially as an Australian company," he says.

"If you go regional in Asia there's that fragmentation – all the different regulators, the cross-border challenge. Europe is a well-regulated environment, like Australia – so that's more suited to our company. It means we understand what kind of products we can create. We don't want to create a product and then find out that the regulator is taking an unfriendly approach."

He recalls a recent visit to the US where he met a bitcoin exchange operator from India who is now having to go to the Indian supreme court to keep his business model afloat.

Permissive regulation

"Permissive regulation is good for building a road map, without the distraction of a regulator saying 'oh you can't do this anymore' – that's happened in India, in China, where you've seen bitcoin operators suddenly saying they can't operate anymore."

The contrasting politics means start-ups often take a different approach in Europe, he says.

"In America, you'll see them trying to use some fancy distributed technology to make it government-proof. There's that libertarian, Silicon Valley vibe of changing the world and making it hard for government to interfere," he says.

"And in China, fintech is more like, 'hey we're going to take everyone out of poverty, let's build just one platform'. Whereas the European model is, 'hey, that's the regulation, let's now find some efficiency and make it work'."

Regulation can also open up new avenues, Tan says. Changes such as the EU's general data protection regulation, or Britain's open banking regime can force companies to rethink their model. "Look at open banking – what happens if there's more data out there? It creates opportunities for more businesses to form."

So what is CoinJar going to get up to in Europe? "We've had an entity in the UK for four years, but it's one of those things, we haven't really cracked Europe or the UK market," Tan says.

"Hopefully by the second half of next year we should have something up and running here again. Right now we're hiring in Australia, building software, I've had my Australian hat on managing that remotely. But more and more I'll be more in this time zone, hopefully have a few hires here, build a global footprint."

More than that, he won't yet say. But the principle is to remain focused, even amid the distractions of the London fintech scene.

"I think a lot of companies in this space are trying to make something really cool and fancy, or make huge tech promises. We're just trying to do right by customers. We've managed to beat a lot of companies just through the sheer virtue of sticking around. It's going to be a long game."